Issuer Participation and Plan Pricing in the Health Insurance Marketplace

We use three years of administrative data from 2014-2016 for the Federally-facilitated Marketplace to look at issuer participation and pricing in the Marketplace. In particular, we examine what market characteristics relate to issuer participation and how new entrants price relative to incumbents. The Marketplaces, together with the Affordable Care Act’s insurance rating reforms, provide a setting in which consumers can shop for health insurance and easily compare products and prices. In addition to these nationwide reforms to the health insurance market, individual state-level decisions on expanding Medicaid or allowing non-ACA-compliant transitional plans also affected the potential consumer base for Marketplace enrollment over the period we study.

The first part of this paper focuses on issuers’ decisions to participate in the Marketplaces. The Marketplaces are dynamic. For example, comparing 2016 to 2015, we find 40 instances where an issuer is new to a state and 35 cases of issuers exiting a state. We also examine issuer participation at the county level to capture the effects of issuers expanding their service areas within states. We assess market characteristics that are associated with new entrants over the time period, including consumer characteristics, mix of plan types, concentration of enrollment, price level, price growth, and state-level policy changes. We use administrative data on enrollment to examine the market share captured by new entrants and that of issuers who exit over the period.

The second part of this paper looks at plan pricing, the evolution of the distribution of plan premiums and how new entrants’ plans are priced relative to competitors. Preliminary evidence from 2015-2016 suggests a narrowing of the distribution: plans with higher premium prices in 2015 had lower rate increases on average in 2016. Going forward, understanding the dynamics of this new market for health insurance will be critical to the success of the Affordable Care Act and maintaining stability in insurance markets.